Socialist Insecurity: Pensions and the Politics of Uneven Development in China
Liou, Chih-shian, Journal of East Asian Studies
Socialist Insecurity: Pensions and the Politics of Uneven Development in China. By Mark W. Frazier. Ithaca: Cornell University Press, 2010. 224 pp. $35.00 (cloth).
After a surge of studies on laid-off Chinese workers, relatively less academic attention has been paid to the Chinese state's endeavor to redress its broken promise that dislocated the lives of the socialist working class. Mark Frazier's Socialist Insecurity is the first book-length study to analyze the politics of China's old-age pension policy after the collapse of the lifetime employment system. It offers a valuable insight into the logic behind the evolution of China's welfare regime.
Frazier begins with the recognition that the development of China's welfare regime was influenced by two opposite forces--retrenchment and expansion that dismantled the old socialist welfare system and built a new welfare state. Such transformation was hardly explained by the existing welfare state literature, which emphasizes social structural changes, the dynamics of national politics, and transnational influence. In addition, the creation of the new welfare regime soon became the most costly expenditure for the Chinese state. It is thus puzzling to find that urban governments have actively involved themselves in assuming the burden of old-age pension provisions. Facilitated by analytical leverage of historical institutionalism, Frazier answers this puzzle by elaborating on the interactions among the political preferences of actors involved in the transformation of China's welfare regime--mainly urban officials and managers of state-owned enterprises (SOEs).
Frazier argues that two preexisting institutions are important in explaining urban officials' preferences and behaviors: the property rights regime that governs the assets of SOEs and the revenue rights of urban governments to collect pension funds submitted by nonstate firms.
Acting as the owners of local SOEs, urban governments were motivated to collude with SOE managers to embark on underpriced privatization of loss-making SOEs, which enriched both parties. The laid-off workers associated with the privatization program were given pension benefits, while the burden of welfare provisions was shifted from SOEs to urban governments. In the meantime, with the central government and the urban workers who stayed employed beating the real cost of the pension, urban governments continually frustrated the central state's effort to standardize the pension system nationwide by resisting transferring local pension funds to higher jurisdictions beyond cities. For urban governments, this strategy had an immediate advantage. Maintaining control over local pension funds meant that urban governments retained the right to collect social insurance fees not only from state firms but also from nonstate firms. The practice would concentrate a large amount of capital at urban governments' disposal, which in turn enhanced urban official administrative capabilities to favor a specific constituency.
Frazier also finds that because China's welfare scheme was localized and thus fragmented, it is more difficult for the central government to engage in wealth redistribution across the nation. As a result, a dramatic increase in pension expenditure did not lead to a decrease in regional inequalities. Instead, the new welfare regime, as Frazier notes, has worsened already serious economic inequalities among regions. Frazier concludes his book with a comparison of welfare regimes between China and two other "large uneven developers," Brazil and South Africa. Unlike other scholars of welfare studies who compare China to either post-communist countries or East Asian developmental states, Frazier notes that China shares common features with other "large uneven developers" in that their fast-growing economies face "built-in income inequality" due to the nations' large populations and geographically uneven distribution of natural resources. …